Sunday, June 26, 2005

Oil prices, the G8 and the untold story

The front page of the Financial Times weekend edition, like most newspapers, says US shares tumbled on Friday after oil reached $60 a barrel. Analysts say oil may soon reach as much as $70 a barrel (especially because in the fourth quarter of the year demand goes up when people turn their heating systems on). Many predict the price will not to fall until it has peaked at a high enough level to have a significant impact on the economy (which may take some time). Then, the slowdown will cause demand to go down, which will lower prices.
While it is true that oil prices are high mainly because of sustained economic growth in parts of the world, there also another untold truth. Governments have the power to avoid economic impacts by taking immediate action to reduce demand in a cost-effective way and without lowering the living standards of their population.
The FT itself has covered this issue in the past. A few months ago, the International Energy Agency issued a report analysing measures that governments can use to “save oil in a hurry”. The potential oil savings and implementation costs of rapid oil demand restraint measures for transport, could reduce world oil demand by up to a million barrels per day or more.
While that report was written with real energy emergencies in mind, there is a huge potential for starting to reduce demand before we get to an emergency. The European Commission estimates the trading block could reduce primary energy demand by 20% without reducing standards of living.
The article on the FT weekend edition says that the issue of oil prices is going to be on top of the agenda at the G8. But is it really? So how come the G8 negotiators deleted wording in their draft report on climate on the huge potential for reducing "stand-by" losses? These are caused by the increasing tendency for product manufacturers to design appliances and electronic products in a way so that they are always on and cannot be properly or easily switched off. Consumers think those flickering lights amount to nothing, but they do have an impact on their electricity costs and on the national energy bill.
The wording of the G8 document, before it was deleted, suggested that something as simple as eliminating stand-by in electric appliances could avoid the need for around 24 large-sized power plants around the world (some of which will certainly be fueled by oil). Would this be very costly to do? No. Would this reduce our standards of living? No (although it may force us to actually get up to switch the TV on, instead of leaving it on day and night - but that may get us some useful excercise...a good thing in times of rising obesity I think).
Unfortunately, no large newspaper is reporting this story. Too bad. I have been a journalist, and I realise that it is far more interesting to write about the latest controversy about nuclear than something called stand-by, which sounds, yawn, boring. But it's not, and failure to report this and other simple demand reduction options ultimately gives the public (and politicians) the wrong picture on the problem and most cost-effective solutions. Journalists will say: "Well, since governments are not acting, there is no story to write about". But isn't it a story in itself that one of the most simple and cost-effective solutions to both climate change and oil demand surges is being ignored if not deliberately suppressed? And is this lack of coverage in the press because "there is no story" ultimately at risk of causing a self-fulfilling prophecy?